[SPQR]

This is a very difficult concept so I think I will illustrate it with a hypothetical example using the most basic economies in the world; the African Continental economies.

Africa makes a great example or theoretical construct because each African nation almost entirely trades with the outside world and not with each other. They almost entirely trade with their former colonizer.

So here is what Debt and Reserve Currency can do to form a taxation system in favor of one nation:

Let us say that South Africa wanted to colonize the rest of Africa (it already had colonized Namibia in the past).

First: the country issues credit in foreign currency to stimulate their economy and expects the currency repaid in Rand or issues credit in Rand. Each works similarly but in the first case the country then sells raw materials to South Africa for the Rand to repay the loans, but uses the loans to buy from their colonizer...get that idea?

Second: Trade begins to drift from former colonizer to South Africa; this being the result of monies owed to South Africa by the respective countries.

Third: Over time, debts are increased in just Rand and the economies become based on reserve currency of Rand rather than (currently) of dollars. Trade is conducted mostly in Rand and thus mostly with South Africa. South Africa is taxing these countries by interest on debts, or if South Africa were to issue debt for purchase by the other countries; then they would be taxing those countries through trade rather than interest.

So I hope that simplifies the situation in theoretical terms because this is EXACTLY what the US is doing to the world.

The problem with just starting with an analogy with the world is the world is not so unipolar as Africa itself. But the US has such a dominance in Reserve Currencies and outstanding debts that it in effect has been taxing the world in two ways.

One; in trade directly. Holding a reserve currency is only useful so you can purchase that country's goods. In times of crises you can use that currency to purchase what you cannot make yourself...

Two; interest. The devaluation of the US currency by inflation is actualy an interest in tax paid to the US by foreign countries. How?

Let us say that the foreign country has $100,000 Dollars in the year AD2000.

Now let's say that in the year AD2006 $100,000 Dollars nominative value buys only $50,000 Dollars of US product. How does the nation off-set its loss in holding US Dollars?

It trades favorably to the United States; raw materials mostly. So a tributary system is begun. The United States sends another $100,000 to the country and they give the US $100,000 worth of material.

The result is now the country has $200,000 Dollars that buys $100,000 Dollars worth of US Goods c. AD2000.

This creates a tributary web similar if not EXACTLY the same as what Rome had constructed in the year AD100.

Let us take a final comparison between Roman and US Grand Strategies.

Rome did not rule its conquered territories directly; though the Empire was certainly more centralized than the American Empire is today. Rome could raise armies from the provences, Rome could lay taxes directly (rather than the more indirect form listed above). But Rome still created its Empire from the tributary tax system. That means this. The Romans taxed the provences in money and used that tax to force the provences to sell raw materials (products) to Rome. Rome and her inner-provences (mostly Italy itself) then made finished products it sold back to the provences such as France, Egypt, Syria, Asia Minor, North Africa, Spain...etc.

The United States has built the same web without the need to have direct rule or taxation of the countries. It is more like the Rand theoretical scenario.

The United States makes loans to countries and expects them to repay it in Dollars. To get Dollars the country begins to trade its goods for Dollars (not just with the US but other nations as well) and in doing so creates a trade network that inevitably puts real money into the US Treasury or into the greater aparatus of the US which is the corporate structure and profit driven society of the US itself.

Through a powerful military the US creates a stable economy to exercise its business, its laws of contract, and thus ensure that these countries trade according to the rules that favor the United States.

In effect the US has created a less maintanence intensive tax structure where the US is able to tax all nations of the world on its own terms. No single nation can resist the US tax; though they can in sort levy taxes of their own by buying US debt in general that means the only good their money is is in buying US goods.

So ... the US by virtue of its own size and power has eliminated most reciprocal forces against its tax system.

Whether or not its tax system is breaking-down is the next question.